Nearly 80 % of homes sold have undisclosed pasts as no law requires sellers to reveal troubled property histories: Expert
PETALING JAYA: Nearly 80% of homes sold in Malaysia are second-hand, yet no law requires sellers to disclose a property’s troubling past – from violent deaths and crime to harassment or safety hazards – leaving buyers to navigate a largely “buyer beware” market.
According to the National Property Information Centre’s Property Market Report 2023 summary, only 21.5% of residential transactions involved new homes, meaning the vast majority occurred in the secondary market.
Universiti Teknologi Malaysia property economics and finance expert Assoc Prof Dr Muhammad Najib Razali said even a small number of properties with troubling histories can attract widespread attention in such a large market.
“There is no statutory or administrative system in Malaysia that records or discloses non-financial histories of residential properties.
“Neither the National Land Code 1965 nor related regulations require such matters to be registered in land titles or sale documentation.”
As a result, Najib said the true prevalence of these properties cannot be empirically measured.
“However, academic studies on Malaysian housing markets do identify the existence of ‘stigmatised properties’, particularly those associated with psychological stigma from violent deaths or serious crime.
“While these properties are not dominant, they are sufficiently present to influence buyer behaviour, especially in high-density urban areas.”
Najib explained that Malaysia’s subsale market largely operates on an “as is where is” basis, reinforcing the principle of caveat emptor, or buyer beware.
“That combination – a huge secondary market, a buyer-beware mindset and patchy public data on so-called ‘soft risks’ – is why stories about problems following a house travel so quickly.”
From a market perspective, he said awareness of a property’s adverse non-financial history can have tangible economic consequences.
“Research shows that once such information becomes known, properties tend to face a longer time-on-market and downward pressure on prices.
“When buyers are unaware at the point of transaction, properties may trade at normal market values, with the stigma only emerging during resale.”
This reflects information asymmetry, reinforced by Malaysia’s contract law framework, he said.
“Under the Contracts Act 1950, silence does not generally amount to misrepresentation,” he said, noting similar pricing effects linked to housing stigma are observed in countries such as the United States and Japan.
On whether property agents should voluntarily disclose safety-related or criminal histories, Najib said Malaysian law imposes no general duty.
“Estate agents are regulated under the Valuers, Appraisers, Estate Agents and Property Managers Act 1981, which requires them to avoid misrepresentation and act in the public interest. “However, there is no explicit requirement to disclose stigma-related issues.”
Still, he said, academic literature on real estate ethics suggests withholding information that would materially affect a buyer’s decision raises fairness concerns.
For buyers seeking to avoid high-risk or so-called “black area” properties, Najib said legal due diligence alone is insufficient.
“Formal searches under land law do not capture safety, social or reputational risks. Buyers need to conduct their own social due diligence.
“This includes speaking to building management, residents’ associations and neighbours, observing the area at different times and asking agents or sellers directly about past incidents.
“A seller’s or agent’s willingness to respond transparently is itself informative,” he said, adding that documenting such inquiries in writing is advisable.
On whether Malaysia should introduce mandatory disclosure, Najib cautioned against a sweeping regime.
“The most appropriate approach would be a targeted disclosure framework with safe-harbour protection,” he said, rather than a broad overhaul of contract or land law.
He pointed to Japan’s system for psychologically impacted properties, which requires disclosure of specific, verifiable events within defined timeframes without permanently stigmatising properties.
“For Malaysia, a limited model focusing on serious, clearly defined safety issues, time-bound disclosure and legal protection for good-faith disclosure would strike the right balance.”
